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ARTICLE · 20 FEBRUARY 2017

Understand Your Target-Date Fund Series

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Target-date or lifecycle funds first came to market in 1994. Since then, they have experienced much growth with nearly every large financial institution today offering their own version of these funds.

United StatesEmployment and HR
Larry Ruff
Larry Ruff
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Target-date or lifecycle funds first came to market in 1994. Since then, they have experienced much growth with nearly every large financial institution today offering their own version of these funds. The enactment of the Pension Protection Act of 2006 (PPA) ignited this explosive growth in target-date funds.

PPA allowed plan sponsors to direct participants' retirement contributions to a target-date fund if they did not choose otherwise. The Department of Labor (DOL) issued a fiduciary safe harbor for plan sponsors that chose to offer target-date funds to their participants as a default investment option, known as a "qualified default investment alternative." Plan sponsors were quick to add target-date funds to their 401(k) plan investment line-up and use it as their default investment option.

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